Oil & Gas Mergers & Acquisitions expected to surge in late 2018

Pioneer, Parsley, mergers

We could be on the cusp of more than $50 billion worth of oil and gas deals through the rest of 2018 according to a new report by the research firm DrillingInfo as they forecast a deluge of mergers and acquisitions in the industry.

The peak of the land rush in West Texas’ surging Permian Basin largely concluded last year, and it is now time for a rush in mergers & acquisitions to begin as oil prices hover at their highest prices since late 2014 at just below $75 a barrel.  This rush is expected to be led by Australia’s BHP Billiton selling their roughly $10 billion portfolio in shale oil and gas assets in Texas, Arkansas, and Louisiana, according to the report from the Austin-based DrillingInfo, a leading oil and gas research and analytics firm.

Potential buyers include most of the leading oil majors like BP, Chevron and Royal Dutch Shell, as well as some of the larger private equity players.  DrillingInfo has noted that BP is rumored to be the likely frontrunner as the British energy giant seeks a major foothold in Texas shale opportunities.

The DrillingInfo report shows that like BHP, other operators are also planning to divest their less-productive land holdings in West and South Texas, among other of the more active plays in the country.  Oil companies have already been focused on cutting costs and optimizing well performance. DrillingInfo says the next money-saving move on the horizon is companies shedding acreage.  “We expect the logjam in quality asset packages to begin to move quickly in the second half of 2018 as the sub-$50 oil price risk is largely over,” said DrillingInfo senior director Brian Lidsky. “These are exciting times and buyers have plenty of choices to rapidly deploy capital.”

DrillingInfo’s Brian Lidsky said oil companies’ moves away from “non-core” acreage is happening now because Wall Street capital that funded big land grabs in recent years is drying up.  “There’s been more vocal demands by Wall Street on oil and gas executives to move their models from a growth in inventory, to a growth in profits and free cash flow,” Lidsky said.

This doesn’t necessarily mean there will be less drilling in Texas, just that holdings will change hands across the industry. According to Lidsky, that’s mostly good news for Houston-based investment firms that will help fund the land deals.


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